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Wall Street tumbles as virus fuels economic worry

Stock MarketsJan 27, 2020 04:29PM ET
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© Reuters. FILE PHOTO: A trader works on the floor of the New York Stock Exchange shortly after the opening bell in New York

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks suffered their worst day in over three months on Monday as China extended the Lunar New Year holiday due to a virus outbreak, fueling worries about the economic impact of containment efforts in the world's second largest economy.

The benchmark S&P 500 suffered its worst weekly performance since September last week as China locked down several cities and curbed travel, reminding investors of the deadly SARS virus that killed nearly 800 people in 2002-03 and cost the global economy billions.

Still, some investors viewed any long-term economic impact as unlikely, given past experiences with viral outbreaks.

"This whole thing is way overblown," said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.

"It seems to me the Chinese are doing a much better job of containing it than with SARS and what did SARS ultimately lead to? Did it lead to some sort of economic catastrophe - no."

After the 2003 SARS (Severe Acute Respiratory Syndrome) outbreak, the S&P rallied more than 10% from the start of the outbreak to the announcement of its containment.

GRAPHIC-The S&P 500 rallied as SARS spread https://graphics.reuters.com/USA-STOCKS/0100B59736G/sars-timeline.png

Travel-related stocks, including airlines, casinos and hotels, were among the hardest hit on Wall Street, while shares of sectors exposed to China's growth, including technology (SPLRCT), materials (SPLRCM) and energy (SPNY), pressured the markets.

Adding to downside pressure was the sluggish start to corporate earnings season with indexes near record levels.

Earnings are now expected to show a decline of 0.5% for the fourth quarter, according to Refinitiv data. Of the 87 companies that have reported though Monday morning, 67.8 have topped expectations, below the 74% rate from the past four quarters.

The Dow Jones Industrial Average (DJI) fell 453.93 points, or 1.57%, to 28,535.8, the S&P 500 (SPX) lost 51.84 points, or 1.57%, to 3,243.63 and the Nasdaq Composite (IXIC) dropped 175.60 points, or 1.89%, to 9,139.31.

The Dow and S&P has their biggest one-day percentage drop since Oct. 2 while the Nasdaq's fall was its largest since Aug. 23. Wall Street's fear gauge, the CBOE Volatility index (VIX), reached 19.02, its highest since Oct. 10.

Technology and internet heavyweights that have powered the recent rally including Apple Inc (O:AAPL), Microsoft Corp (O:MSFT), Alphabet Inc (O:GOOGL) and Amazon.com Inc (O:AMZN), which account for about 15% of the S&P 500 weighting, lost at least 1.6%.

Wynn Resorts Ltd (O:WYNN), Melco Resorts & Entertainment Ltd (O:MLCO) and Las Vegas Sands Corp (N:LVS), which have large operations in China, plunged at least 5%. The NYSE Arca Airline index (XAL) dropped 3.32%.

Yum China Holdings Inc (N:YUMC) tumbled 5.27% after the company said it had temporarily closed some of its KFC and Pizza Hut stores in Wuhan, the epicenter of the outbreak.

The rush to safe-haven assets sank U.S. Treasury yields, with the benchmark 10-year note (US10YT=RR) falling as low as 1.603%, its lowest since Oct. 10, and the yield curve between the two-year (US2YT=RR) and 5-year (US5YT=RR) inverting for the first time since Dec. 4, putting pressure on lenders. The S&P 500 banks index <.SPXBK> was down 1.42%.

The S&P energy index (SPNY) dropped 2.76% as crude prices settled down about 2% on fears the outbreak would dent demand.

Fourth-quarter earnings will kick into high gear this week with 141 of the S&P 500 companies, including Apple, Microsoft Corp and Boeing Co (N:BA), reporting.

Declining issues outnumbered advancing ones on the NYSE by a 3.63-to-1 ratio; on Nasdaq, a 3.25-to-1 ratio favored decliners.

The S&P 500 posted 20 new 52-week highs and 12 new lows; the Nasdaq Composite recorded 42 new highs and 92 new lows.

About 8.11 billion shares changed hands in U.S. exchanges, compared with the 7.31 billion daily average over the last 20 sessions.

Wall Street tumbles as virus fuels economic worry
 

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Comments (13)
Andrew Paeth
Andrew Paeth Jan 27, 2020 3:33PM ET
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I can understand oil, retail, travel etc... but ore miners and factory goods given they are shut down anyways for new years. It’s a joke...
Jeremy DjSkeezy Selph
Jeremy DjSkeezy Selph Jan 27, 2020 3:18PM ET
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MakaveliCityRecords Amazon Business
Sam Jennings
Sam Jennings Jan 27, 2020 3:09PM ET
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Maybe it's the impeachment hearings, not the virus, doing this... face it.  Trump is the reason it was climbing... the Democrats are trying to remove him.  The virus only kills 2-3% of its victims.  That's bad, but honestly, China has the people to spare... cold as it might sound... they could shed 2-3% of their people and still man all the stations.
Brent Shields
Brent Shields Jan 27, 2020 3:09PM ET
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my theory exactly, they want to hide thexfact the the stock market loves trump so they use some obscure Chinese virus to blame it on! Democrats arnt smart but they are smart enough.
Peter Carrington
Peter Carrington Jan 27, 2020 1:00PM ET
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Can we buy Coronavirus stocks?
Brian Coppens
Brian Coppens Jan 27, 2020 12:26PM ET
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it's all a question of how much commerce will be affected as this spreads.
Inanc yanık
Inanc yanık Jan 27, 2020 11:52AM ET
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Influenza killed about 80,000 people in the 2017-2018 season, according to figures released by the Centers for Disease Control and Prevention. The previous high for a regular flu season, based on analyses dating back more than three decades, was 56,000 deaths
Inanc yanık
Inanc yanık Jan 27, 2020 11:52AM ET
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nice play, this virus might be new but its not a plague... this is all nonsense panic
Dietmar Stahl
Dietmar Stahl Jan 27, 2020 11:26AM ET
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Black Monday stock crash
Ilya Atomiq
Ilya Atomiq Jan 27, 2020 9:42AM ET
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Btfd!
Ace Smooth
Ace Smooth Jan 27, 2020 9:34AM ET
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It amazes how rigged the stock market is. You mean people actually are selling because of a virus in another country? Or is it the computers selling?
Adam Lipman
Adam Lipman Jan 27, 2020 9:34AM ET
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If you want to talk about rigged, look at the last 3 months of exuberant blind buying
Adrian White
Adrian White Jan 27, 2020 9:34AM ET
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I think you guys are confusing "rigged" with "reactionary". The markets may be over reacting, but they are not rigged, and this is not an example of being rigged.
Noah Wright
Noah Wright Jan 27, 2020 9:34AM ET
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there's 60 million people not going to work in China right now. and however many thousands / millions more cancelling vacations. this has a huge impact on the economy.
Junk Man
Junk_Man Jan 27, 2020 8:53AM ET
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Any buy on the dips out there?
Jenia Golbstein
Jenia Golbstein Jan 27, 2020 8:53AM ET
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when they'll get control over it then it's the most obvious signal for buying the dip
Space Lord
Space Lord Jan 27, 2020 8:47AM ET
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SP500 target 1850
Axel Le Gamin
Axel Le Gamin Jan 27, 2020 8:36AM ET
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well what goes up must come down ,I enjoyed the long rally for months though
Sam Mojtabai
Sam Mojtabai Jan 27, 2020 8:36AM ET
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Exactly just the begining and people are talking buying the dip
Space Lord
Space Lord Jan 27, 2020 8:36AM ET
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Sam Mojtabai  investors are simple
Peter Dikeakos
Peter Dikeakos Jan 27, 2020 8:32AM ET
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To all of strong bears...enjoy the other side of the mountain.
 
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